As the United States imposes extensive tariffs on Southeast Asian nations while orchestrating a delicate trade truce with Beijing, Southeast Asia finds its longstanding diplomatic playbook under severe strain. For decades, regional capitals maintained strategic autonomy by turning to Washington for security guarantees while courting Beijing for economic growth. Today, that dual-track strategy is rapidly collapsing under the weight of overlapping geopolitical pressures, forcing nations from Jakarta to Hanoi into an increasingly uncomfortable corner.
The Erosion of ‘Not Choosing Sides’
For a long time, the diplomatic mantra across the Association of Southeast Asian Nations (ASEAN) was simple: avoid choosing sides. Regional states carved out agency by leaning on the US security umbrella while enmeshing China within economic and trade frameworks. This classic hedging posture treated economics and security as separate domains.
Here is why that binary separation no longer works. Modern great-power competition spans security, economics, and technology simultaneously. Supply chain diversification, friend-shoring, and the China-plus-one strategy mean that trade policies are now inextricably linked to national security concerns in Washington.
The friction escalated notably during the first Trump administration through sudden withdrawals from multilateral pacts like the Trans-Pacific Partnership and the onset of bilateral trade wars. When the Biden administration followed with strict tariffs and framed China as a broad-spectrum national security threat, the pressure on neutral capitals multiplied.
By the time the second Trump administration took shape, those economic penalties expanded well beyond Beijing to hit Southeast Asian states directly. More critically, Washington began signalling a willingness to condition its longstanding security guarantees on trade negotiations. As Singapore’s then-Prime Minister Lee Hsien Loong warned back in 2018, circumstances eventually arrive where ASEAN may have to choose.
Tariffs, Truces, and Transshipment Investigations
The economic squeeze intensified on April 2 following the announcement of ‘Liberation Day’ tariffs by the White House, hitting Southeast Asian economies hard. While regional capitals initially weathered the shock through temporary buffers like front-loaded shipments and delayed implementation of duties, macro realities caught up fast.
Later in October 2025, the US and China struck a one-year trade truce at the summit in Busan. Under this arrangement, Washington agreed to postpone fees on Chinese ships arriving at US ports. To offset this concession, Washington doubled down on enforcing strict Rules of Origin (ROO) for goods flowing through Southeast Asian ports.
The pressure escalated further on March 11, 2026, when the US launched a trade investigation into alleged excess industrial capacity against sixteen of its most important trade partners. Indonesia, Malaysia, Thailand, and Vietnam landed squarely in the crosshairs. Because Vietnam, Malaysia, and Thailand are perceived as potential transhipment points for Chinese exports, any subsequent US penalties threaten to disrupt regional supply chains.
Meanwhile, Beijing has quietly expanded its regional economic footprint while maintaining an assertive military posture in the South China Sea. China’s strategy of engagement paired with deep economic integration offers a counterweight to Washington’s transactional approach.
Security Commitments and Shifting Regional Order
Trade negotiations are actively reshaping regional security architectures. The United States remains heavily dependent on China for rare earths and processed minerals—the backbone of the American defence industry. This structural vulnerability gives Beijing structural leverage.
A Washington that relies on mineral cooperation from Beijing is less willing to push back against Chinese regional ambitions. This dynamic leaves front-line states, particularly the Philippines serving as the ASEAN Chair for 2026, strategically exposed. The Philippines’ chairmanship coincides with the tenth anniversary of its legal victory at The Hague, yet that milestone is increasingly overshadowed by ASEAN’s inability to deliver meaningful security outcomes in the South China Sea.
The limits of regional mediation became glaringly obvious during the 2025 Thailand-Cambodia conflict. Both Donald Trump and Xi Jinping moved quickly to position themselves as mediators on the sidelines of the ASEAN Foreign Ministers’ meeting. While China deployed diplomatic observers and called for regional restraint and respect for the ASEAN process, the US leveraged the threat of higher tariffs against the conflicting parties.
Although a ceasefire was eventually hammered out on Malaysian soil—co-organised by the US with active Chinese participation—the agreement collapsed within a month. The rapid breakdown reflected that mediation driven by economic coercion and domestic political interest—bolstering Trump’s popularity—cannot guarantee long-lasting regional peace.
| Domain | U.S. Approach | China’s Approach | Southeast Asian Impact |
|---|---|---|---|
| Trade & Tariffs | High tariffs, ROO enforcement, and capacity investigations. | Economic expansion and trade integration. | Supply chain disruption and risk of penalisation for transshipment hubs. |
| Security Guarantees | Conditional on trade negotiations; dependent on Chinese rare earths. | Assertive maritime posture paired with active diplomatic mediation. | Strategic exposure for front-line states like the Philippines. |
| Diplomatic Autonomy | Demanding alignment via economic and trade leverage. | Offering alternatives through bilateral and multilateral frameworks. | The traditional ‘not choosing sides’ posture is becoming increasingly untenable. |
The Macroeconomic Ripple Effect
Beyond bilateral flashpoints, this recalibration carries profound consequences for global investors and transnational supply networks. International corporations that spent millions pivoting toward Southeast Asia under the China-plus-one model now face regulatory whiplash. If Washington slaps heavy tariffs on goods originating from nations merely processing Chinese components, multinational boardrooms must rethink manufacturing footprints entirely.
Global financial markets are watching closely as currency fluctuations and trade barriers threaten to dampen post-pandemic recovery across emerging Asian markets. Foreign direct investment into ASEAN is no longer just a calculation of labor costs and logistical ease; it is a high-stakes gamble on regulatory compliance and geopolitical survival.
As the year progresses, the room for diplomatic ambiguity continues to shrink. Southeast Asian leaders must decide how to protect their domestic economies while standing firm against external coercion. The era of effortless hedging is drawing to a close, and the choices made in capitals across the region will define the global balance of power for years to come.
How do you see regional middle powers managing this mounting pressure? Can ASEAN reinvent its consensus model before external powers dictate the terms of engagement? Share your thoughts below.
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